Annual and Sustainability Report 2020 We challenge conventional packaging for a sustainable future 2020 in brief External trends Strategy Target fulfi lment Our business Sustainability Directors’ report Risk management Financial reports Sustainability data Additional information We have clickable navigation. Contents This is BillerudKorsnäs 3 2020 in brief 4 CEO’s statement 6 Our business model 8 Climate effect 9 External trends 10 Strategy 12 Targets and target fulfi lment 15 BillerudKorsnäs’ mission to challenge conven- Our business 16 tional packaging for a sustainable future clearly Commercial 17 sets out why we exist and how we view our role Product area Board 18 in society. Challenging the conventional and Product area Paper 20 thinking outside the box are essential if we Innovative packaging solutions 22 are to develop the innovative and sustainable Operations 23 packaging solutions our planet needs, hand Wood supply 25 in hand with our customers and partners. Sustainability 26 Focus areas 27 Safety fi rst 28 Climate impact 30 Materials for the future 32 Our value chain 33 Sustainability foundation 34 Sustainable wood supply 34 Responsible supply chain 35 Engaging workplaces 37 Resource-effi cient production 39 Community engagement 40 Responsible business 41 Directors’ report This year’s Annual Report and Sustainability Report BillerudKorsnäs reports the Group’s fi nancial and non-fi nancial infor- Financial statements and notes mation in a joint report. The report refl ects BillerudKorsnäs’ mission Contents 43 and integrates fi nancial, sustainability and corporate governance Sustainability data 114 information to provide a full and cohesive description. BillerudKorsnäs’ statutory annual report, which includes the Directors’ report and fi nan- Additional information cial statements, can be found on pages 43–110. Five-year summary 123 The BillerudKorsnäs sustainability report is prepared in accord- Quarterly data 125 ance with the Global Reporting Initiative (GRI) guidelines for sus- BillerudKorsnäs shares 127 tainability reporting, GRI Standards, and is externally audited. It Key fi gure defi nitions 129 comprises pages 26-42, 63-67 and 114–121, plus the GRI Appendix Shareholder information, key dates which is available at http://billerudkorsnas.com/Sustainability. and contact persons 130 Sustainability reporting also includes the statutory sustainability Addresses 131 report under Chapter 6, Section 11 of the Annual Accounts Act. 2 BILLERUDKORSNÄS ANNUAL AND SUSTAINABILITY REPORT 2020 2020 in brief External trends Strategy Target fulfi lment Our business Sustainability Directors’ report Risk management Financial reports Sustainability data Additional information A leading packaging innovator BillerudKorsnäs offers innovative packaging solutions and sustainable packaging materials made Net sales, SEK bn from natural cellulose fi bre. We are a leading producer and create value through our deep knowledge of materials and optimally designed packaging. Our materials are used primarily in consumer sectors, where the requirements for packaging are high in terms of both function and design. 23.9 EBITDA, SEK bn Global market 2.7 We have around 2 000 customers in over 100 countries. These customers are packaging manufacturers, brand owners and large retail and supermarket chains. While Europe is the Number of employees, approx. core market, we are gradually strengthening our presence in the leading growth markets of Asia, as well as in the Americas. 4 400 Our wood raw material comes from responsi- bly managed forests and the manufacturing takes place at eight resource-effi cient produc- tion units with a total capacity to manufacture over three million tonnes of material per year. Net sales split,% Product area Board, 57 Product area Paper, 32 • Production units Solutions and Other, 11 • O f fi c e s Net sales by region, % Net sales by market segment, % EBITDA1 split, % Europe, 70 Africa, 4 Food & Beverages, 64 Product area Board, 64 Asia, 20 Other, 1 Industrial, 21 Product area Paper, 36 America, 5 Consumer & Luxury Goods, 10 1 The Group’s EBITDA excluding EBITDA for Solutions Medical & Hygiene, 5 and Other and for Currency hedging etc. 3 BILLERUDKORSNÄS ANNUAL AND SUSTAINABILITY REPORT 2020 2020 in brief External trends Strategy Target fulfi lment Our business Sustainability Directors’ report Risk management Financial reports Sustainability data Additional information 2020 in brief Sales decreased mainly due to challenging market conditions in certain product segments. Lower market prices were partially offset by higher sales volumes, reduced raw material costs and effi ciency measures. Our climate footprint shrank but the accident rate was unacceptably high. Sales volumes, ktonnes and growth, % Net sales, SEKm and growth, % EBITDA, SEKm and EBITDA margin, % Reduced CO2 emissions (Scope 1 & 2), % Accident rate own employees 3,000 10 30,000 10 4,000 20 0 9 3,000 15 2,000 5 20,000 5 –4 6 2,000 10 1,000 0 10,000 0 –8 3 1,000 5 0 –5 0 –5 0 0 –12 0 16 17 18 19 20 16 17 18 19 20 16 17 18 19 20 18 19 20 16 17 18 19 20 This year’s sales volumes increased by Net sales decreased by 2%, mainly due Profi tability was affected by lower market CO2 emissions decreased by 7 percen- The lost time injuries per million hours 4% to approximately 2.8 million tonnes of to challenging market conditions. prices in the product area Paper. The tage points in 2020, mainly as a result of worked for employees declined to 6.1. high-quality packaging material. EBITDA margin was 11%. more stable production. Key fi gures 2020 2019 2018 2017 2016 Net sales, SEKm 23 884 24 445 23 692 22 345 21 657 Operating profi t before depreciation/amortisation (EBITDA), SEKm 2 712 2 830 2 943 3 760 3 606 Net sales growth Gross margin (EBITDA margin), % 11 12 12 17 17 Operating profi t/loss, SEKm 774 1 086 1 430 2 241 2 045 Operating margin, % 3 4 6 10 9 -2% Capital employed, SEKm 24 667 24 938 23 687 19 548 16 906 Return on capital employed, % 3 4 7 12 12 Profi t/loss before tax, SEKm 679 1 265 1 341 2 103 1 937 Net profi t/loss, SEKm 660 6 7202 1 037 1 638 1 518 EBITDA margin Earnings per share, SEK 3.19 32.502 5.01 7.91 7.33 Dividend per share, SEK 4.301 4.30 4.30 4.30 4.30 Cash fl ow from operating activities, SEKm 2 331 2 319 2 502 3 316 3 742 Investments in intangible assets, property, plant and equipment, SEKm 1 250 2 868 5 120 4 196 1 607 11% Interest-bearing net debt/EBITDA, multiple 2.0 1.9 3.2 1.5 1.1 Average number of employees 4 468 4 596 4 502 4 395 4 274 1 Board’s proposal. 2 Including profi t from discontinued operations of SEK 5 709 million, corresponding to SEK 27.61 per share. 4 BILLERUDKORSNÄS ANNUAL AND SUSTAINABILITY REPORT 2020 2020 in brief External trends Strategy Target fulfi lment Our business Sustainability Directors’ report Risk management Financial reports Sustainability data Additional information Key events Measures due to the coronavirus pandemic COVID-19 brought new challenges but no major dis- ruptions to the business. Early measures were taken to protect employees’ health, safeguard deliveries and prepare contingency plans. The maintenance shut- downs at the production facilities, which were planned for the spring, had to be postponed and were suc- cessfully completed in the autumn thanks to careful planning and thorough measures to ensure safety. Streamlined organisation A new organisational structure was introduced to pave the way for increased effi ciency. The new organisation follows the business fl ow: Wood supply, Operations and Commercial. The organisational change resulted in a smaller Executive Management Team and a new reporting structure comprising the operating seg- ments Product area Board, Product area Paper, and Solutions and Other. Recognition for sustainability BillerudKorsnäs maintained its leading position in the Dow Jones Sustainability Index for the third year in a row. The results from this year’s ranking show that BillerudKorsnäs is among the top 10% most sustain- able of the companies evaluated and the company with the highest score in the Containers & Packaging category. BillerudKorsnäs also achieved top marks for its sustainability work in evaluations by Sustainalytics, EcoVadis and CDP. Christoph Michalski new President and CEO In November, Christoph Michalski took over as the new President and CEO of Billerud- Signifi cant progress for the new machine at Gruvön Korsnäs. Christoph BillerudKorsnäs’ new board machine in Gruvön, with its annual Michalski was most capacity of 550 000 tonnes, began producing coated material recently CEO of Vinda during the year and the certifi cation process for liquid pack- International Holding, aging board is under way. The technical ramp-up was fully a leading Asian pro- implemented by the end of the year, and the focus has now ducer of innovative and shifted to commercial development. The customer response to high-quality tissue and hygiene products, and has the coated material from KM7 has been very positive. previously also held senior positions within the SCA Group, Unilever and Fonterra. 5 BILLERUDKORSNÄS ANNUAL AND SUSTAINABILITY REPORT 2020 2020 in brief External trends Strategy Target fulfi lment Our business Sustainability Directors’ report Risk management Financial reports Sustainability data Additional information CEO’s statement Dear Shareholders, spent more time at home. Net sales for the year declined by 2% due to lower market prices for sack and kraft paper, while our sales volumes The year 2020 was an extraordinary period in which the COVID-19 pan- increased by 4% to around 2.8 million tonnes. Lower raw material costs demic threatened people’s health, lives and livelihoods around the world. and savings had a positive impact on profi tability but did not offset Our hearts go out to all those who have been affected by serious illness, the effects of lower market prices and the ramp-up of our new board the passing of loved ones or fi nancial hardship.